CI likely to trend higher this week

LAST close (March 21): 632.17 points, up 3.62 points from a week ago. Week’s high: 635.56 points; Week’s low: 622.32 points. 

The KLSE Composite Index (CI) recovered from earlier losses last week and advanced on selective bargain-hunting buying of a few key index stocks, prompted by the start of the Iraq war. Trading remained cautious last week as players are not too sure as to when the war would end. News that the government would bring forward the announcement of the Malaysian economic stimulus package due for release on April 7 supported sentiment toward late trading. 

Now that the war is in progress, traders are of the opinion that markets are all about oil prices now. Stocks and oil prices are set to move in opposite direction for sometime. The sooner the US-led forces could secure control of the major oil fields in Iraq, the better the chances of a market recovery. Light sweet crude oil has fallen back to the US$27 per barrel level and prospects of further declines in price and the possibility of a short-war would motivate traders to enter the market quickly this week. People generally fear that it would be to late to buy and could possibly miss the bullish wagon when the war actually ends.  

Despite losses in some of the key index-linked stocks, four index heavyweight stocks provided the thrust for the index to close the week in the plus territory. For the week, index heavyweight Maybank rose15 sen to RM8.10 and supported the CI by 1.12 point. Maxis Communications advanced 31 sen to RM5.25 and added 1.61 points to the index. Genting and PLUS Expressways both closed in the positive territory and contributed a combined 1.02 point to the CI. Tenaga Nasional and Telekom lost 20 sen and 15 sen respectively and dragged the CI lower by 2.32 points. Petronas Gas, MISC and Sime Darby all ended in the negative column and erased a combined 1.46 points from the index.  

Total weekly volume of the 100-stock CI increased to 250.33 million shares from 233.47 million shares a week ago. The highest single day volume for the week was recorded on March 20. Average daily volume for the week rose to 50.04 million shares from 46.69 million shares a week ago.  

Chart-wise, the CI has ended the week on a slightly bullish setting and is expected to remain steady this week. Improved momentum this week could take the index higher for a test of its immediate chart-resistance at the 635-645 point level. Minor chart-resistance for this week remains at the 650-655 level. Based on the daily chart, the index has an immediate support this week at the 625-630 level. For the immediate term market to stay positive, these levels should not be breached.  

The daily and weekly technical indicators finished the week positive and indicated that the market could extend on its upward recovery this week.  

The daily Money Flow Index (MFI) soared from a weekly low of 30.18 points on March 17 and settled the week sharply higher in the positive zone at 54.29 points. The daily MFI has confirmed that the index is in an upward wave. The weekly MFI remains constructive for the near term and closed higher in the positive zone at 51.69 points. Analysis of the weekly MFI signalled that the near-term market would remain positive.  

Exponentially smoothed moving-average price line on daily high and low: The daily MAV-lines closed the week neutral-to-slightly positive. Closing prices above the MAV-low level for the first time in three weeks show that the index is attempting a trend change. Based on the MAV-lines, the CI has an immediate cycle resistance at the 637-level, and a successful push above this barrier would confirm that a trend change had succeeded. The MAV-low line has indicated that the index has a support at the 630-level.  

Stochastics: The daily stochastics closed Friday bullish after having triggered the buy-signal on March 19. Analysis of this daily oscillator indicates that the index is in an upward correction.  

The daily oscillator per cent K and D closed the week higher and out of the bearish extended-move zones at 67.29% and 59.75% respectively. The weekly stochastics finally triggered the buy-signal and signalled that the near-term trend is positive. The weekly oscillator per cent K and D closed the week higher at 24.56% and 14.69% respectively. 

The 3-day and 7-day exponentially smoothed moving-average was successful in its crossover on March 20 and indicated that a trend-reversal has started. The 3-day and 7-day ESA-lines closed the week with the 3-day and 7-day ESA-lines higher at 630.00 and 629.00 points respectively. Based on the ESA-lines, the index is in an upward cycle and has the potential for further advances this week. 

Relative strength index (RSI): The daily RSI (not shown in the chart) rose from a weekly low of 31.79 points on March 17 and closed the week sharply higher in the positive zone at 42.59 points. Analysis of the daily RSI indicates that the market is out of its oversold position and is expected to trend higher this week. The weekly RSI edged higher and closed in the negative territory at 38.80 points. Analysis of the weekly RSI indicates that the near-term trend of the market is slightly positive.  

Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) triggered the buy-signal on March 20 and stayed positive during Friday’s close. The MACD and trigger-line ended the week higher in the negative territory at minus 6640 points and minus 7.14 points respectively. Analysis of this daily oscillator shows that the index is in an upward trend. The weekly MACD (not shown in the chart) held on to its sell-signal during Friday’s close and signalled that the main trend is slightly negative. The weekly MACD closed below the trigger-line and settled lower in the negative zone at minus 10.50 and minus 10.07 points respectively. 

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